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us stock market, trend trading stock
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10/23/07 Stock Split Report
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: BBBB; BIDU; EDU; GRMN
Trailing stops: DNR
Stop alerts issued: COG; XTO
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the SSR alert service you can sign up at the following link:
http://www.investmenthouse.com/alertssr.html
SUMMARY:
- AAPL sparks surge as RIMM, GOOG and BIDU pitch in and drive NASDAQ back up to pre-Friday level.
- Money is moving to new areas, but there are still some serious laggards acting as anchors on some indices.
- Getting too volatile on heavy volume once more.
Earnings send the market lower, earnings bounce it back up.
Friday CAT, SLB, HON helped trigger some selling and expiration added more fuel to what turned out to be an unintended homage to the 1987 crash. Monday stocks started to rebound after a lower start, and Tuesday the big name techs continued to garner all the money, driving higher on strong earnings, big deals, and a sense, as strange as it may seem, they were a safe haven as some of the industrials that led the chart through the year lose some steam. AAPL announced blowout earnings and RIMM locked up a deal to sell Blackberries in China. That led the large cap techs higher as NASDAQ 100 dominated the Tuesday action (+2.21%).
NASDAQ techs were not the only game in town, however. T was beneficiary to AAPL's huge iPhone success. DD (chemicals), BNI (rail), AXP (credit cards), and WHP (appliances) all nicely beat expectations. On Friday CAT said the US economy stinks but a broad swath of big name consumer and other companies tied directly to the economy say it isn't so. CAT specifically points to the housing market and extrapolates a slower overall economy as that slowing spreads out. Last time we checked CAT didn't employ that many economists; sounds as if it was shooting from the hip, looking for some help. That is often the case when a company feels a slowdown: whine a bit and maybe you get some government action. It's worth a shot. In any event, the other companies cited above and indeed many others that have reported since CAT don't show or predict the kind of slowdown CAT alluded to.
The market seemed to feel that way. It gapped higher, tried to give it away midmorning, but as has been the case when the market is going to trend higher for the session, it found support midday and rallied back through lunch and the afternoon session, closing at the session highs. The tennis match continued with the bulls volleying a shot down the line against the bears. That put NASDAQ back to where it was before the Friday selling and SP500 back above the 50 day EMA after bouncing off the key 1490 level this week. Earnings were the downside catalyst Friday and Monday, and they were the upside catalyst Tuesday.
Technically the action was excellent once again. We talk of high to low action being a positive. Today the action was high to higher; that is also positive. When a market or stock can start the day strong and push higher through the session, that is very solid action, and that is exactly what the market did Tuesday.
The internals were again just decent. Volume surged on NASDAQ as it galloped higher, but it was lower again on NYSE. Lots of issues still in the financials, small caps, and recent leaders in the industrials. Tech is surging, but CAT's sour milk outlook is keeping many of the large cap industrials in hiding. Breadth was a bit better with NYSE showing a 2:1 session. NASDAQ was so-so again with just a 1.6:1 session. All large cap tech getting the action. Saw this before in the mid-1990's and that ultimately turned into the short 1998 bear market. Of course, this is really early in the game to be making that comparison; the large cap leaders ran for years before they suffered that selloff. Suffice it to say it has not hurt being in the likes of AAPL, RIMM, BIDU, etc.
The charts are a very mixed bag. NASDAQ is back to the pre-Friday selloff level. SP500 tried twice at the 50 day EMA and failed twice. It got the push it needed in the afternoon and finally broke through that level as well as the March 2006/March 2007 up trendline. Not bad. Not great, but not bad, basically doing what it has to do. DJ30 continued its bounce from the 13,500 test, but it is way down in a hole as it bounced on low volume and closed below the 50 day EMA as well as the June twin peaks. Don't like the way it looks at all.
Leadership is obviously in the large cap techs. Metals were in the game again as well. The prior two sessions it was steel. Tuesday it was copper coming back to life with solid moves from the likes of PCU, FCX and company. Good to see that. Energy saw some renewed life in drillers, but that was about it; with oil trading lower (85.27, -0.75) and talk of a drop to 80/bbl there is not a lot of life in energy just now. Financials were again laggards, and of course that bears upon SP500. Sure they were moving higher, but they are showing a weaker, low volume rebound from the Friday pummeling, and that is not what great recoveries are made of.
Tech was the leader into the close. AMZN was up 10 clicks ahead of its earnings, i.e. 10%. Wild. It reported great after hours earnings, but they were not great enough when compared to Q1 and Q2 that were big blowouts. It gave it all back after hours. JNPR's earnings disappointed. So did BRCM. RVBD as well. All are getting flattened after hours. As much as AAPL was rewarded for its earnings these stocks are getting hammered. Thus while tech led the move back up to the pre-Friday levels, they are likely to start Wednesday lower, struggling to hang onto the gains.
THE MARKET
MARKET SENTIMENT
VIX: 20.41; -1.23
VXN: 24.13; -1.13
VXO: 19.85; -1.68
Put/Call Ratio (CBOE): 0.97; -0.04
Bulls: 62.0%. Up from 60.2% the prior week and continuing the streak higher and well above the 55% level considered bearish. Fourth week above that level, an indication that the market is getting overdone. The theory is that when too many investors or advisors are bullish then most of the money is in the market and there is nothing ready to come in off the sidelines to drive prices higher. On a steady climb from a low of 40.6%, the low for this round. Never made the thirties. Hit 56.7% in June and now it has blown past that. The market peaked about a month later. For reference it bottomed in the summer 2006 near 36%, and 35% is considered bullish.
Bears: 19.6%. Falling below the 20% threshold, continuing the sharp drop. 21.5% the prior week and down 25.0% the week before that. It peaked at 37.4% on this move. Closer to the 18% hit in August, and it topped the June 2006 peak (36%) on this run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005).
NASDAQ
Stats: +45.33 points (+1.65%) to close at 2799.26
Volume: 2.39B (+20.66%). Big volume, on par with the Friday expiration selling and the reversal on the Wednesday before that Friday selloff. Big downside volume on big downside moves. Big upside volume on big upside moves. The bulls and bears are fighting it out in growing numbers.
Up Volume: 1.553B (+72.705M)
Down Volume: 777.126M (+290.875M)
A/D and Hi/Lo: Advancers led 1.57 to 1. Pretty weak given the size of the price move. NASDAQ 100 gained 2.21%, so we know what was moving and what was getting the money.
Previous Session: Advancers led 1.51 to 1
New Highs: 55 (+38)
New Lows: 70 (-14)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped higher, tested the gap, coming within 5 points of filling it, then rallied to close at the session high. Really helped when RIMM kicked it into gear in the afternoon after its China deal went through. This puts NASDAQ back to where it was before the Friday selling, i.e. just 35 points off its intraday high hit two weeks back when it gapped higher . . . and then rolled over to close the session with a high volume selloff. NASDAQ is going to get tested in the morning as NASDAQ futures rolled over after hours when a series of weaker earnings were announced and the stocks were slaughtered in the late trade.
SOX (-0.25%) managed to struggle back from its low but once more it woefully lagged the overall market as TXN's earnings were a disappointment. Not much life here.
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +13.26 points (+0.88%) to close at 1519.59
NYSE Volume: 1.312B (-5.95%). Weaker below average volume as the NYSE indices continued the rebound after reversing Monday. Strong selling volume Friday (and that was some expiration as well), weak on the recovery, particularly Tuesday. Not the best price/volume action as the indices rebound to try and dig out of this hole.
Up Volume: 874.99M (+35.919M)
Down Volume: 412.248M (-129.45M)
A/D and Hi/Lo: Advancers led 2.07 to 1. Quite decent.
Previous Session: Advancers led 1.22 to 1
New Highs: 51 (+31)
New Lows: 30 (-12)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 actually gapped higher, an indication of the strength of the move . . . at least early on. It gave it up midmorning, turning negative but holding the 90 day SMA on the low and holding easily above the 1490 level it tested on the Monday low. It held where it had to hold, and it also recovered the 50 day EMA and a pretty important 2006/2007 trendline in the process. Still has resistance at 1525 on up to 1550. It put itself in a hole and digging out can be a tough order.
SP600 (+0.97%) put in a good showing, but with all the room it has to the upside after the tumble this month, the move was not that stellar. It rallied back up to the 50 day EMA and some price resistance at that level (425). Still has a long way to go to recover and the pattern indicates it has quite a bit more work to do before it can try those old highs near 445 again.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
The blue chips are trying to recover as well, but similar to SP500, the rebound volume is quite low. The bounce thus far is just a shell of the Friday selling, and the bounce leaves it just below the June highs (13,692). What was a nice pullback collapsed Friday, and the recovery has not been the kind that suggests an immediate run back up that shakes off a one-time selling event.
Stats: +109.26 points (+0.81%) to close at 13676.23
Volume: 206M shares Tuesday versus 229M shares Monday. Volume is falling as DJ30 tries the rebound, indicating there are not enough sellers to push it right now.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
Existing home sales, oil inventories, and a whole lot more earnings are on tap. Money is clearing still moving into the large cap techs and we saw some moving into metals and a few other select areas/stocks. Overall, however, the leadership has narrowed as investors still sort through the debris pile left after the Friday selling. Techs are getting money as a sort of safe haven; rather unusual as noted above, but that has been the case as NASDAQ has outperformed the other indices handily.
The most recent round of earnings may change that Wednesday as noted earlier. JNPR, BRCM, RVBD, AMZN all disappointed and were body slammed after hours. Thus NASDAQ, the strongest of the indices, will be under pressure early and will have to show it is worthy by fighting off this round of disappointment. Getting a bit tired of the tennis match the market is currently playing: down big one day, up big the next.
That brings us to the next key point. Once more the market is showing high volume volatility, at least with respect to NASDAQ (NYSE volume has been rather low all along other than the Friday expiration session). Back in June the market was ripping up and then down on stronger and stronger volume. That continued into early July and then the market rolled over. At the time we noted this kind of volatility is unproductive. The buyers and the sellers are in a battle, and the high volume shows there are a lot of believers on both sides. It shows that upside gains are sold into with vigor, and then they are bought after the fade.
Overall that is a bad indication for the market in general as it typically indicates big money moving out of stocks, and if it continues there eventually are no more buyers and the market corrects. Individually there is still money moving into stocks as we have seen by the good bases and breakouts as well as light volume pullbacks followed by high volume buying. We have been buying into those based upon that action, but we are also watching the overall market action with a wary eye. We were looking to see just how strong the bounce would be. NASDAQ is solid; the others are not as their bounces were smaller and on lower volume. Thus we lightened up on a lot of positions recently. We will continue to take advantage of the strong movers when they flash the buy indications, but we are also going to have to quite protective if they don't continue to perform.
That places a premium on how NASDAQ reacts Wednesday to the latest round of earnings. There continues to be a good number of solid stocks in good buying position, and we are going to be looking at those as potential buys if NASDAQ can absorb the AMZN et al earnings. We are also going to be looking around for some downside plays though the volatility has pumped up the put option prices, particularly with the financials, making it harder to get the right combination of price, delta, and potential movement to provide a solid return for the money we have to put up (the old risk/reward aspect).
In sum the NASDAQ action was excellent while the NYSE lagged. If NASDAQ can hold up with this afternoon's earnings disappointments then the complexion continues its improvement. If NASDAQ starts to stumble as well, however, then this high volume volatility likely sends the indices on another correction. For now we will be ready to take things the way the market directs, looking at some solid upside leaders in position to move upside as well as some downside to profit in the event the volatility does in fact undermine the indices here in the October surprise.
Support and Resistance
NASDAQ: Closed at 2799.26
Resistance:
2834 is the October intraday peak
2887 from a September 1999 peak
2920 from an October 1999 peak
Support:
2778 from a July 1999 peak
2766 is the November/February up trendline
The 18 day EMA at 2755
2725 is the July high
2712 is the November/December/February up trendline
The 50 day EMA at 2690
2673 is the early July high
2634.60 is the June peak
S&P 500: Closed at 1519.59
Resistance:
The 10 day EMA is at 1530
1534 is the early July high
1539 is the mid-June intraday high
1541 is the early June high
1553 intraday high from March 2000 used to be the all-time peak
1556 is the July intraday high
1576 is the Thursday intraday high.
Support:
1517 is the July 2006/March 2007 up trendline
The 50 day EMA at 1516
The 90 day SMA at 1502
1490.72 is the early June closing low and early August peak.
The 200 day SMA at 1478
1475 from peaks in December 1999 and January 2000
Dow: Closed at 13,676.23
Resistance:
The early June high at 13,676 (closing), 13,692 (intraday)
The mid-June high at 13,689
The August high at 13,696
The 50 day EMA at 13,696
The 10 day EMA at 13,798
14,020 is the old channel line
The July high at 14,022
14,088 is the early October closing high
14,198 is the Thursday intraday high.
Support:
The early July peak at 13,671
The 90 day SMA at 13,565
13,310 is the July 2006/March 2007 up trendline
The 200 day SMA at 13,149
12,845 is the August closing low
12,786 is the June peak
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
October 24
Existing home sales, September (10:00): 5.20M expected, 5.50M prior
Crude oil inventories (10:30): 1.78M prior
October 25
Durable goods orders, September (8:30): 1.5% expected, -4.9% prior
Initial jobless claims (8:30): 320K expected, 337K prior
New home sales, September (10:00): 775K expected, 795K prior
October 26
Michigan sentiment, October final (10:00): 82.3 expected, 82.0 prior
End part 1 of 3
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